Money & Banking
EMIs set to come down; banks to cut lending rates soon

Following the rate cut by RBI, bankers have indicated a reduction in interest rates for both lending and deposits

 

Mumbai: Borrowers can now look forward to their equated monthly instalment (EMIs) coming down soon as leading bankers on Tuesday said they will pass on the benefit of Reserve Bank of India (RBI) reducing its short-term lending rate and cash reserve ratio (CRR) to customers, reports PTI.

 

Bankers, however, did not say by how much or how soon they will reduce their lending rates.

 

Stating there is room for monetary transmission, State Bank of India (SBI) chairman Pratip Chaudhuri said, “The overall cost of funds gets lowered by Rs300 crore following the CRR cut which we will pass on to our borrowers without compromising on the net interest margin (NIM).

 

“But how and in which pocket will it be, would be decided soon. Our ALCO (risk management committee in banks) will be meeting tomorrow to finalise the details,” Chaudhuri told reporters.

 

Indicating a cut in base rate, Chanda Kochhar of ICICI Bank said there is going to be a transmission on the lending side, while on the deposits front, it will be wait-and-watch.

 

“There is going to be a lag but we will not take a hit on NIM. The cuts are positive for EMIs.”

 

Hinting that her bank has no immediate plan to lower deposit rates, she said, “It is not necessary to assume that deposit rates will come down with reduction in the lending rates.”

 

HDFC Bank managing director and chief executive Aditya Puri said, “The 25 bps reduction in the CRR will benefit us to the tune of Rs70 crore and there will be a rate cut. A case for transmission is there.”

 

Punjab National Bank’s KR Kamath, while welcoming the rate cuts, said there was a case for transmission but that hinged upon better numbers by the bank.

 

RBI earlier in the day cut CRR, the part of deposits banks have to keep with the central bank, by 0.25%, releasing Rs18,000 crore into the system.

 

Indian Overseas Bank CMD M Narendra, however, said it is a challenge for banks to pass on the benefits.

 

Narendra said that growth-inflation dynamics in the current quarter will decide whether the regulator will follow this up with further cuts. “Against this, recovery in growth is expected to be gradual through 2013-14, which again depends on global commodity price trends.”

 

“It will be, therefore, a challenge for banks to pass on the benefit of the rate cut to push growth and consumption demand without impacting the already slowing deposit growth,” he said.

 

Bank of Baroda chairman and managing director SS Mundra, however, said there will be an impact on his NIMs as lending rates come down without repricing of the deposit rates. He did not say whether there will be a cut in the lending rates.

 

SBI managing director A Krishna Kumar said, “a rate cut is likely. Rates on both advances and deposits may come down.”

 

According to Canara Bank executive director AK Gupta, the bank would consider interest rate cut in the light of RBI policy action.

 

Echoing the views, Bank of India executive director N Seshadri said most banks are likely to transfer the rate cut.

 

“Full transmission will happen on both lending and deposit rates. A 25 bps cut is most likely,” he said.

 

On poor deposit growth, about which governor D Subbarao expressed concerns while unveiling the third quarter monetary policy review in which he cut the repo and CRR rates by 25 bps, Chaudhuri blamed this partly on the flight of deposits to mutual funds.

 

“We have seen a flight of deposits as mutual funds are better on taxation and liquidity management,” he said.

User

Karnataka: 13 rebel BJP MLAs submit resignations to Speaker

A petition filed by the BJP seeking disqualification of 12 rebel MLAs on the ground of “anti-party” activities is already before the Speaker and is likely to have a bearing on their resignation letters

 

Bangalore: Thirteen rebel members of the legislative assembly (MLAs) from the Bharatiya Janata Party (BJP), who share close ties with former party strongman BS Yeddyurappa, on Tuesday submitted their resignation letters to Assembly Speaker KG Bopaiah, reports PTI.

 

The MLAs submitted their letters quitting their assembly membership in person to Bopaiah, who had a one-on-one meeting with them to ascertain whether they were doing so on their own.

 

Even as the consultation process was underway, the Speaker’s secretariat issued a statement, saying that the resignation of Challakere (ST) constituency MLA Thippeswamy has been accepted.

 

The fate of the resignation of 12 MLAs is yet to be known.

 

The petition filed by BJP seeking disqualification of 12 rebel MLAs on the ground of “anti-party” activities is already before the Speaker and is likely to have a bearing on their resignation letters.

 

The BJP today filed another complaint seeking disqualification of five MLCs who have been supporting Karnataka Janata Party, floated by Yeddyurappa after breaking ranks with the BJP.

User

Home, auto loan rates could see moderation: Bankers

Both lending and deposit rates are expected to see a downward revision following the RBI’s decision to cut CRR and repo rate by 25 bps each

 

Mumbai: Borrowers could see better days ahead as banks are expected to cut lending rates following the Reserve Bank of India’s (RBI) decision to cut short-term lending rate as well as unlocking Rs18,000 crore by slashing cash reserve ratio (CRR) by 0.25%, reports PTI.

 

Soon after the Reserve Bank unveiled its mid-quarter review of the monetary policy, several bankers hinted that they may consider rate cut in their Asset Liability Committee (ALCO) meeting.

 

RBI governor D Subbarao in the third quarter monetary policy review surprised the market by cutting short-term lending rate called repo by 0.25% to 7.75% and CRR by similar margin to 4%, releasing Rs18,000 crore primary liquidity into the system.

 

Commenting on RBI’s action, SBI managing director A Krishna Kumar said “a rate cut is likely. Rates on advances and deposits could come down simultaneously. The RBI’s action is positive”.

 

Indian Overseas Bank executive director AK Bansal said the RBI’s action will result in moderation of interest rates in the coming days. Both lending and deposit rates are expected to see a downward revision which will improve growth prospects, he said.

 

According to Canara Bank executive director AK Gupta, the bank would consider interest rate cut in the light of the RBI policy action.

 

Echoing similar views, Bank of India executive director N Seshadri said most of the banks are likely to transfer the rate cut. “Full transmission will happen on both lending and deposit rates. A 0.25% cut is most likely.”

 

Tushar Poddar, managing director and chief India economist, Goldman Sachs, said, “While the RBI’s action was ahead of market expectations, we were expecting it to ease more on repo rather than CRR. A front-loaded cut on the repo would have helped lower interest rates in the economy faster, in our view, and was justified by the downside surprises to inflation. The central bank, however, has taken the view that easing liquidity by cutting CRR will be of greater help in monetary transmission, and ease the growth process.”

 

Kotak Mahindra Bank chief economist Indranil Pan said RBI delivered a very balanced policy. “As expected, they chose the calibrated path of a 25 basis points cut in the repo and the reverse repo rates. They wanted to avoid a repeat of April 2012 when the RBI had cut the repo rate by 50 basis points and then had to pause with surprises creeping in from the inflation side,” he said.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)